50th-place state tax ranking stings New Yorkers

Cuomo official calls study biased in favor of flat tax

Published 10:21 pm, Thursday, October 11, 2012

ALBANY — The Washington, D.C.-based Tax Foundation made some waves earlier in the week when it handed New York a last place spot in its national rankings of the tax-friendly, or unfriendly states.

"New York scores at the bottom," concluded the report.

The state Business Council shot back on Tuesday, hours after New York's 50th-place ranking, saying that the survey overlooked the strides Gov. Andrew Cuomo has made in improving the business climate, including a 2 percent cap on property taxes.

"This report does not reflect the progress New York has made in its budget and tax policy over the past two years," said Business Council President and CEO Heather Briccetti.

Then on Thursday, Cuomo's secretary, Larry Schwartz, responded by saying the survey was biased and put too much emphasis on income and other taxes and not enough on the property tax burdens, which often trump other costs in New York.

"They basically took a bunch of data sets and manipulated them to fit their worldview, which is based upon a flat tax, not a progressive tax, which we have in New York state," Schwartz said during an interview on Talk 1300 radio with host Fred Dicker.

He noted the conservative, non-partisan Tax Foundation supports the concept of a flat tax, as opposed to a progressive tax where higher earners pay a larger percentage of their incomes.

"If they had bothered to look at the taxes, they would have known that New York businesses pay over five times as much in property taxes to localities as they do in income taxes," added Schwartz.

He said that businesses in the Empire State pay $443 per employee in corporate income taxes while they pay $2,300 per employee in property taxes.

The foundation does put more weight on income taxes than property taxes, said economist Scott Drenkard, who worked on the survey.

But that's because there is more variability in income tax rates between the states and the idea of the survey is to point out the competitive differences, he said.

For property taxes, he said, the rates are similar in most places — except for New York and New Jersey, which are in a class of their own since the taxes are so high.

"It's more tightly clustered," he said of property tax rates in the other 48 states.

The off-the-charts property tax rates in New York and New Jersey are borne out in the numbers, said Drenkard, who agreed with Schwartz's $2,300 per person property tax cost to business.

He said that was basically a per capita calculation that looked at the cost spread out over the entire state's population of 19.4 million people, pitted against the total amount of property tax dollars that are paid each year.

(Tax department figures show that in 2009, the latest year for which full data was available, $44 billion in property taxes were paid: $26 billion by residential owners and $16 billion by businesses).

Schwartz had other problems with the survey. He scoffed at some of the top-ranked states, such as third place Nevada (Wyoming, with no income taxes and lots of oil and gas revenue, took the top spot for business-friendly tax environments).

Even though Nevada looks good on taxes, Schwartz pointed to its 14 percent unemployment rate, compared to 9 percent in New York.

"I'd rather be in New York and not in Nevada," Schwartz said.

Drenkard noted Cuomo hasn't been shy about using his organization's rankings in the past — in his 2011 State of the State speech he alluded to New York's poor rating (they were also in last place at the time) in pointing to the need for change.

"He didn't have a problem with it then, but I guess he has a problem with it now," Drenkard said, alluding to Cuomo.